JEMFAC Progress Monitoring Presented by the RMI Government

JEMFAC Progress Monitoring Presented by the RMI Government 6 th RMI-U. S. JEMFAC Meeting Washington D. C August 27 th, 2008

Outline of Presentation • Economic Update & Policy Reform • Fiscal Year 2009 Budget • Priority Funding • Fiscal Update & Decrement Management Photo: Rairok Elementary School II

Policy Framework • Maintaining Macroeconomic Stability • Improving the Business Policy Environment • Prioritizing Education & Health Sectors • Implementing Infrastructure Development Projects Photo: Jaliut High School (JHS) Phase II – Admin. Building

Sectoral Shares of GDP ( FY 2008) NGOs 1% Households 13% Private Enterprise Public Enterprise Government 38% Private Enterprise 32% Finance (Banks) Government NGOs Households Finance (Banks) 6% Public Enterprise 10% Photo: NIHS Phase II - Classrooms

Recent Economic Performance 8. 0% 6. 0% 4. 0% 2. 0% 0. 0% -2. 0% -4. 0% Real GDP Growth 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 -5. 4% -3. 6% -2. 9% 5. 1% 2. 7% 3. 8% 3. 4% 5. 6% 1. 7% 1. 3% 2008 Forcaste d 1. 8% -6. 0% • Positive GDP growth continues but at a modest pace; • Slow growth in FY 2007 & 2008 partly due to high global energy prices; • Real GDP growth in FY 2007 was 1. 3%; • Projected Real GDP growth for FY 2008 is 1. 8%; Photo: JHS Phase II – Staff House

What is influencing GDP? • Modest value added activities in the private sector • Job losses and reduction of working hours at USAKA • Public sector • High energy cost. Photo: Northern Islands High School (NIHS) Phase II - Classrooms

Industry Developments Positive prospects for the RMI economy: • The newly formed Marshall Islands Shipping Corporation has operated with improved delivery services to the outer islands; • Japan Airlines has conducted direct chartered flights between Tokyo and Majuro, boosting the tourism industry; • The Tuna Loining Plant is open and operational with new management and prospect of employing up to 600 workers by the end 2008; • Majuro Atoll Waste Company (MAWC) has tremendously improve waste collections. Photo: Majuro Atoll Waste Company (MAWC)

USAKA Impact Summary FY 07 (Baseline) FY 08 RMI Workforce 1030 Yearly RMI Employee Tax $1. 5 Contribution Million US Workforce On-Island 1034 Yearly US Contractor Tax Contribution $2. 5 Million 912 FY 09 FY 10 FY 11 FY 12 15% 3% 3% 3% $1. 3 $1. 1 $1. 0 Million Million 958 17% 4% 5% 4% $2. 3 $1. 9 $1. 8 $1. 7 $1. 5 Million Million *estimated FY 08 – FY 12 and reflect Prime Contractor (KRS) and AAFES only; *figures not adjusted for inflation Photo: Pan Pacific Foods (RMI) Inc.

Employment Trend Factors 4, 500 4, 000 3, 500 Private Sector 3, 000 Kwajalein US Base 2, 500 2, 000 Non-Governmental Sector RMI Government 1, 500 Other Public Sectors 1, 000 500 0 FY 97 • • FY 98 FY 99 FY 00 FY 01 FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 Modest growth in Private Sector in FY 08, expected growth in FY 09 Decreased employment in USAKA Slight decrease in Non-Governmental Sector Stagnant growth in RMI Government and Other Public Sectors Photo: Pan Pacific Foods (RMI) Inc.

RMI Priorities: • Education and Health sectors continue as the RMI Government’s two top priorities; • Direct positive impact on all other sectors and the economy, as a whole, over the medium and long-term. Photo: Rairok Elementary School II

Education & Health Spending • Recurrent spending on Education & Health have grown rapidly since FY 2003: • Education recurrent spending has increased by 125%; • Health recurrent spending has increased by 71%; • Spending on other areas has declined by 9%. Photo: JHS Phase II – Admin. Building

Education and Health Spending Recurrent Expenditure FY 2003 - FY 2008 (General Fund, Compact Funds, Federal Grants and Special Revenues) $ 100, 000 $ 90, 000 $ 80, 000 $ 70, 000 Mo. H $ 60, 000 $ 50, 000 Mo. E $ 40, 000 $ 30, 000 Others $ 20, 000 $ 10, 000 $ FY 08 FY 09 (Proposed) Photo: JHS Phase II – Iakwe Sign

Fiscal Year 2009 Budget • FY 2009 Budget projected at $124. 5 million • Slight increase from FY 2009 partly due to inflation adjustments • Revenues forecast decrease largely to reduction in labor force in USAKA • Federal grants forecast to be steady • Special Revenues slightly decreased Photo: CMI Classroom

Factors Affecting FY 2009 Budget Formulation • Energy costs which led to a declaration of economic emergency; • Wage & Hiring Freeze Policy; • Modest assumptions of inflation and growth used for revenue estimates based on recent trends and expectations; • Utility costs increased sharply; • ADB debt payment to increase substantially; • Slight reduction in Compact infrastructure grant to support Ministry of Health & Ministry of Education; • High inflation rate. Photo: Rairok Elementary School II

Government Fiscal Status • • Overall fiscal position is stagnant; Imposed freeze on General Fund; Recent freeze on vacant government posts; Reduction of subsidies to State Owned Enterprises (SOE); • Aggressive tax collections; • Consolidation of funds Photo: NIHS Phase II - Classrooms

Consumer Price Index – FY 2008 Photo: MAWC – Red Bin Repaired

Global Budget Figures Funding Source FY 2008 FY 2009 Domestic Revenue $ 34, 999, 891 $ 33, 249, 896 Compact Sector & Other Grants $ 40, 272, 580 $ 41, 833, 589 Special Revenues $ 7, 528, 008 $ 6, 784, 089 Federal Grants $ 7, 310, 129 $ 7, 326, 078 Overseas Revenue (ROC recurrent and projects) $ 5, 500, 000 $ 5, 250, 000 Compact Trust Fund $ 9, 713, 700 $ 10, 784, 291 Kwajalein Development Fund $ 2, 050, 670 $ 2, 167, 308 Kwajalein Landowner payments $ 16, 189, 500 $ 17, 110, 328 Total $ 123, 564, 477 $ 124, 505, 579 Photo: JHS Phase II – Admin. Building

FY 2009 Compact sector grant allocations Compact Sector Grants Breakdown Proposed Sector Allocations Education $ 11, 957, 410 Health $ 7, 404, 620 Private Sector $ Capacity Building $ Environment $ Infrastructure Development $ Total $ 31, 834, 412 425, 000 12, 047, 382 Photo: CMI Classroom

FY 2009 Education Spending Table 1: MOE Funding (total $) by Outcome, Agency and Source MOE Outcomes & Compact General Special Related Agencies Base Grant Fund Revenue Outcome 1: To improve the efficiency and effectiveness of MOE staff through the provision of budget, finance and HR development Outcome 2: Improve education results in the RMI through research, testing, data management, and IT services Outcome 3: Provide property maintenance services to all schools and administration building and coordinate expanded community role for maintenance and upkeep Outcome 4: To provide access and improve student performance and learning outcomes at early childhood and primary levels Outcome 5: To provide access and improve student performance and learning outcomes at the secondary level Outcome 6: To vocationalize the RMI curriculum Outcome 7: To continue to improve the effectiveness of classroom instruction through improved, curriculum, testing and teacher program delivery Outcome 8: To improve service delivery and learning outcomes by addressing the special needs of the students on Kwajalein atoll Outcome 9: To address needs of special education students Outcome 10: National Scholarship Board Outcome 11: National Training Council College of the Marshall Islands Total Ebeye Special Needs Federal and other Grants SEG Capital Tuition/Fees Pell Grants Non-Appro Auxiliary Non-Appro Total 2, 026, 938 738, 820 0 1, 210, 978 0 0 0 3, 976, 736 97, 500 238, 492 0 0 0 60, 000 0 395, 992 332, 322 330, 668 0 0 0 123, 000 0 785, 990 4, 456, 698 109, 373 0 0 0 2, 490, 475 0 0 0 7, 056, 546 2, 228, 005 84, 538 0 0 0 960, 543 0 0 0 3, 273, 086 0 0 0 0 0 45, 750 379, 344 0 0 0 0 425, 094 816, 344 0 0 1, 692, 845 0 0 0 2, 509, 189 0 104, 999 0 0 1, 677, 186 0 0 1, 782, 185 600, 000 173, 223 0 100, 000 0 679, 000 0 1, 552, 223 0 0 174, 631 0 0 476, 004 0 0 642, 000 1, 292, 635 1, 353, 853 2, 000 0 0 770, 771 100, 000 5, 000 3, 416, 910 0 12, 641, 534 11, 957, 410 4, 159, 457 174, 631 1, 792, 845 2, 447, 957 6, 100, 000 5, 000 3, 416, 910 642, 000 35, 691, 210 Photo: Rairok Elementary School II

FY 2009 Recurrent Education Spending by Outcomes Photo: JHS Phase II - Staff House

FY 2009 Health Spending Table 1: MOH Funding (total $) by Outcome, Agency and Source MOH Outcomes Outcome 1: Provide Primary and Preventive Health Care and Improve the Health Status in then Outer Islands General Fund Health Care Revenue Compact Base Grant Ebeye Special Needs US Federal Grants Other Grants Total 492, 349 681, 000 777, 455 0 430, 565 0 2, 381, 369 411, 589 30, 000 0 0 1, 070, 366 96, 300 1, 608, 255 1, 077, 925 1, 874, 000 3, 085, 298 0 1, 480, 503 0 7, 517, 726 Outcome 4: To Provide Kwajalein Atoll with efficient Hospital Services (Ebeye) 462, 593 801, 000 1, 151, 337 1, 585, 393 25, 000 0 4, 025, 323 Outcome 5: To Improve the Effectiveness of Hospital Service for Kwajalein Atoll 10, 169 0 23, 000 85, 750 15, 243 0 134, 162 27, 238 15, 000 239, 988 72, 146 694, 940 0 1, 049, 312 Outcome 7: To Provide Effective Management of OH Personnel and Finance 282, 295 308, 000 1, 802, 542 0 784, 754 210, 400 3, 387, 991 Outcome 8: To Provide Timely and Current HIS Service 145, 549 0 0 29, 300 174, 849 Outcome 9: To Provide Referral Service to Patients who Require Medical Attention 75, 144 2, 268, 000 0 0 2, 343, 144 0 0 325, 000 2, 984, 851 5, 977, 000 7, 404, 620 1, 743, 289 4, 501, 371 336, 000 22, 947, 131 Outcome 2: Provide Primary and Preventive Health Care on Majuro Outcome 3: To provide Effective Hospital Service Majuro Outcome 6: To Provide Kwajalein Atoll with Efficient Primary and Preventative Health Care Services and Management Outcome 10: MAWC Total Photo: JHS Phase II – Staff House

FY 2009 Recurrent Health Spending By Outcomes Photo: NIHS Phase II - Classrooms

Infrastructure Development • Infrastructure Development Plan is consistent with the RMI’s sectoral priorities, the Education and Health Sectors: • The College of the Marshall Islands • Elementary and High Schools • Majuro Hospital Redevelopment • National Energy Capital Projects • Matching for grants; • Infrastructure and Maintenance Fund (IMF) • Majuro Atoll Waste Company (MAWC) • Infrastructure grant increased in FY 2009 due to inflation adjustments and well above 30% requirement Photo: CMI Classroom

FY 2009 Capital Infrastructure Compact Capital Fund $ 12, 047, 381 College of the Marshall Islands $ 5, 000 Elementary and High School Projects $ 3, 625, 012 Majuro Hospital $ 1, 000 National Energy Capital Projects Marshall Islands Ports Authority (FAA Matching) $ 1, 000 $ 700, 000 Infrastructure Maintenance Fund $ 602, 369 Majuro Atoll Waste Company $ 120, 000 Photo: CMI Classroom

FY 2009 Infrastructure Plan IMF 5% Mo. E MIPA (FAA Matching) 6% Mo. E 72% Mo. H NECP 8% Mo. H 9% MIPA (FAA Matching) IMF Photo: Rairok Elementary School II

Decrement Management • Full inflation is critical in coping with rising costs and will allow time to make fiscal adjustments; • Cost controls through hiring and wage freeze policy; • Consolidation of Special Revenue Funds • Tax Reform Commision Photo: CMI Classrooms

Compliance Management: Audit Progress since FY 2003 • No. of Audit Findings reduced by 50%; • No. of unauditable Component Units: 8 - 0; • Amount of Questioned Costs reduced by 33%; • Fixed Assets qualification resolved two years in a row; • Request for extension of DOI TA to assist Component Units • Achieved Unqualified Opinion – Clean Audit for the first time Photo: Namdrik Elementary School (Phase 1 – Outer Islands School)

Thank you “Kommol Tata” Photo: MAWC – Majuro Dumpsite (Rebuilding Red Bins)

IDMP 0018 Marshall Islands High School Phase II IDMP 0017 Rita Elementary School Phase II IDMP 0020 Namdrik Elementary School (Phase I) IDMP 0028 Laura High School Phase II (Stage II)